Oct. 9, 2015

Final RBC rule on NCUA Board agenda
The NCUA Board will consider a final rule on “risk-based capital” at its Oct. 15 meeting in Alexandria – what has come be known as “RBC2” after the board issued a second proposed rule on the subject earlier this year. That latest proposal included numerous modifications from the first, which was originally proposed in 2014. In its comment letter last spring, NASCUS noted that the changes represented “a significant improvement over the original proposal.” However, NASCUS recommended “further refinement” to ensure that the final rule “is right-sized for the credit union system and does not place credit unions at a competitive disadvantage in the marketplace.” NASCUS made more than a dozen suggestions for refinement, including recommendations for: adjustments to defined terms (such as “appropriate state official”); honing the “complexity asset proxy” to be consistent with the congressional mandate regarding risk-based capital; and including supplemental capital in the risk-based capital numerator (i.e., strengthen the utility of supplemental capital for credit unions). The proposed rule has also been the target of congressional efforts to make the agency “stop and study” the impact of the bill on credit unions before implementation (the Risk-Based Capital Study Act (H.R. 2769), sent last week by the Financial Services Committee to the full House for consideration, would do exactly that). Also last week, the measure’s three sponsors -- Reps. Stephen Fincher (R-Tenn.), Denny Heck (D-Wash.) and Bill Posey (R-Fla.) -- asked the agency to voluntarily conduct the study “before moving forward and finalizing the risk-based capital rule.” In response, Chairman Debbie Matz Thursday wrote to the three lawmakers that the agency would “compile a report to respond to your request shortly after the Board's consideration of a final rule on Oct. 15.” Also on the board’s open meeting agenda for next week: a proposed rule on permissible investment activities – bank notes (Part 703.14), and delegations of authority, approval of community charter requests.

‘Safe harbor’ passes House – but future uncertain under veto threat
A NASCUS-sought “safe harbor” period from the CFPB’s Truth in Lending Act-Real Estate Settlement Procedures Act integrated disclosure (TRID) rule, which became effective Oct. 3, received a big shot in the arm this week when the House voted to extend and formalize the period to Feb. 1. NASCUS strongly supports a TRID “safe harbor,” as outlined in the association’s comment letter to the consumer agency this summer. In the letter, NASCUS urged the agency to adopt a “hold harmless period” (that is, a period in which a credit union would be protected from legal recourse), which would recognize “the magnitude of the operational changes that will accompany this rule, and give financial institutions a good-faith opportunity to manage their risk without disrupting their service to members.” The bill approved Wednesday, H.R. 3192 (the Homebuyers Assistance Act), by a vote of 303 – 121 was sponsored by Reps. French Hill (R-Ark.) and Brad Sherman (D-Calif.). It now heads to the Senate. However, the outlook for the legislation beyond Congress is murky: The White House this week issued a veto threat, which stated if the president were presented with H.R. 3192, his senior advisers would recommend that he veto the bill.

Marijuana banking, NCUA budget transparency bills add co-sponsors
Two pieces of NASCUS-supported legislation have continued to build support over the last several days and weeks. The Marijuana Businesses Access to Banking Act (H.R. 2076) – which would help clear up the regulatory ambiguity for credit unions and other financials in serving legal state marijuana businesses and their affiliates -- has added one new co-sponsor as of last week (Oct. 1): Rep. Reid J. Ribble (R-Wis.). Three Republicans are now on the bill (Ribble, Rep. Mike Coffman (Colo.) and Rep. Joseph Heck (Nevada)). The legislation, sponsored by Rep. Ed Perlmutter (D-Colo.), now has a total of 33 co-sponsors. Meanwhile, the NCUA Budget Transparency Act (H.R. 2287), sponsored by Rep. Mick Mulvaney (R-S.C.), has added five new co-sponsors since Labor Day, and three in the last week or so. Reps. Brad Ashford (D-Neb.), and Lynn Jenkins (R-Kansas), both signed on the week after Labor Day. Reps. Dennis Ross (R-Fla.), Scott Rigell (R-Va.) and Bill Johnson (R-Ohio) all signed on last week. Mulvaney’s bill now has 22 co-sponsors. The measure requires the NCUA Board to open its budget process to notice and comment (including publication in the Federal Register) from stakeholders and the public. As NASCUS has pointed out in letters of support for the legislation, a formal notice and comment requirement for NCUA’s budget, including the overhead transfer rate (OTR), is not only sound public policy; it also helps ensure an equitable playing field for state and federally chartered credit unions.

Summary outlines ‘small entity’ – and notes limitations
We have posted on our website a summary of NCUA’s IRPS 87–2 (as amended by IRPS 03–2 and 13–1) and final rule to increase the asset threshold used to define the term ‘‘small entity’’ under the Regulatory Flexibility Act (RFA) from $50 million to $100 million in assets. The effective date of the final rule is Nov. 23. The RFA generally requires federal agencies to determine and consider the impact of proposed and final rules on small entities. NCUA’s new final rule and IRPS will define a small credit union for RFA purposes as a FICU with less than $100 million in assets, amending section 791.8(a) governing NCUA’s procedures for developing regulation. We also include a note in the summary pointing out that a change in the definition of small credit union does not affect existing NCUA rules regarding liquidity funding or interest rate risk. “Those rules contain reduced expectations, or outright exceptions, for credit unions under $50 million in assets,” our note states. “The rules however do not reference ‘small credit unions’ but rather specify the asset ranges in the rule text. NCUA will not change those asset thresholds at this time. Likewise, NCUA will proceed with its rulemaking related to risk-based capital (RBC) and the definition of complex credit union independently from this proposed change to the definition of small credit union,” the note concludes.

Summit less than 2 weeks away; McWatters to speak
It’s less than two weeks to go until the 2015 NASCUS State System Summit in New Orleans (Oct. 21-23), but we’re still adding to and tweaking the program. The latest addition: NCUA Board Member J. Mark McWatters joins the speaker line up. McWatters is now in his second year as a board member. Others on the NASCUS Summit speaker line up include NCUA Board Vice Chairman Rick Metsger (who will address the group and participate in a panel on field of membership); Conference of State Banker Supervisors President and CEO John Ryan; Economist Adam Goldin of Moody’s Analytics; Nick Bourke of The Pew Charitable Trusts; James Risler of Cisco Systems; Cynthia Campbell, Director of Impact and Labs, Filene – and many more. There’s still time to sign up! Join us!

BRIEFLY: Happy ICU Day (next week)
Happy International Credit Union Day – albeit a week early (ICU Day is officially Thursday, Oct. 15). The theme this year is something you’ve heard before (but it never hurts to repeat it) – “People helping people.”